Travelers Property Casualty Citigroup - PDF by zqe13933

VIEWS: 62 PAGES: 17

More Info
									2002 PROPERTY AND CASUALTY MARKET CONDUCT EXAMINATION

                           OF


            TRAVELERS INDEMNITY COMPANY
                    (TRAVELERS)

                           BY

         THE FLORIDA DEPARTMENT OF INSURANCE




                  DATE FILED: -01/03/03
                                                    TABLE OF CONTENTS

EXECUTIVE SUMMARY ............................................................................................................ 1

CERTIFICATE OF AUTHORITY – AUTHORIZED LINES ...................................................... 2

COMPANY OPERATIONS/MANAGEMENT............................................................................. 3

REVIEW OF POLICIES ................................................................................................................ 6

   HOMEOWNERS........................................................................................................................ 6
   COMMERCIAL AUTOMOBILE.............................................................................................. 8

CANCELLATIONS/NONRENEWALS REVIEW ..................................................................... 10

COMPLAINTS/INVESTIGATION REVIEW ............................................................................ 11

CLAIMS REVIEW....................................................................................................................... 12

AGENTS/MGA REVIEW/ADVERTISING/MARKETING....................................................... 13

PENDING ISSUES....................................................................................................................... 14

EXHIBITS .................................................................................................................................... 15
                                EXECUTIVE SUMMARY

Travelers Indemnity Company (Company) is a foreign property and casualty insurer
licensed to conduct business in the State of Florida during the scope of this property and
casualty market conduct examination. The scope of this examination was January 1,
1999 through May 31, 2001. The examination began December 30, 2001 and ended May
24, 2002.

The purpose of this examination was to complete a previously postponed, routinely
scheduled examination and to verify that the business practices of the Company are in
compliance with Florida Statutes and Rules.

A total of three hundred forty (340) files were examined for this Company with eighty-
one (81) errors identified. The following represents general findings; however, specific
details are found in each section of the report.

Ten (10) complaint files were examined with no errors identified.

One hundred (100) homeowner policies were examined with seven (7) errors identified.
The errors were due to incorrect premium computations, incorrect CAT Fund factors, and
incorrect protection classes.

One hundred (100) commercial automobile policies were examined with sixty-four (64)
errors identified. The errors were due to incorrect premiums caused by incorrect rates,
incorrect territories, failure to apply fleet factors, failure to apply credits/debits within
filed range, failure to apply credits/debits within 25% range, failure to
offer/obtain/maintain UM forms, and failure to provide timely notice of renewal
premiums.

Fifty (50) cancellations and nonrenewals were examined with three (3) errors identified.
The errors were due to failure to provide proof of mailing.

Fifty (50) claim files were examined with four (4) errors identified. The errors were due
to failure to properly adjust claims, failure to disclose information and failure to maintain
records.

Thirty (30) files were examined for the agents/MGA/advertising review with three (3)
errors identified. The errors were due to use of unappointed agents and failure to
properly countersign.

As a result of the findings of this examination, $8,689.73 was returned to Florida
consumers due to overcharges of premium and underpayments of claims. Also, it has
been estimated that approximately $120.00 is to be paid to the Florida Department of
Insurance for licensing/appointment fees owed due to unappointed agents. See Pending
Issues Section.




TRAVELERS INDEMNITY COMPANY                                                                     1
            CERTIFICATE OF AUTHORITY – AUTHORIZED LINES


GENERAL COMMENTS

The Certificate of Authority and Renewal Invoices were reviewed for all years within the
scope of the examination.

EXAM FINDINGS

The review included verification of the lines of business the Company was authorized to
write during the scope of the examination versus those lines actually being written. It
also included verification that notification requirements were met for any lines of
business that were discontinued.

No errors were found.




TRAVELERS INDEMNITY COMPANY                                                               2
                    COMPANY OPERATIONS/MANAGEMENT

HISTORY/MANAGEMENT

Travelers Indemnity Company was incorporated on March 25, 1903, under the laws of
the State of Connecticut. The Company was part of Travelers Property Casualty
Corporation, which was an indirect, wholly-owned subsidiary of Citigroup, Inc. Since
completion of the examination, the property and casualty business of Travelers was spun-
off from Citigroup.

The Company’s home office is located at One Tower Square, Hartford, CT. The
Company’s website can be accessed at: www.travelers.com.

The Company’s corporate officers are listed in Exhibit I.

COMPANY PROCESSES/STATISTICAL AFFILIATIONS

Computer System

The Company is supported by a Data Center and two LAN Centers. The Data Center
houses a multitude of large, mid-range and small online, batch processing and data access
servers. The LAN Centers support the distributed environment. Servers in this
environment run Microsoft Windows, UNIX and Novell. The Company utilizes multiple
levels of security to ensure the integrity of the network, integrity of the data and the
systems, the identification and authentication of the users, access control, non-
repudiation, and accountability.

Anti-Fraud Plan

The Company has filed a Plan with the Florida Department of Insurance as required by
Section 626.9891, Florida Statutes.

The Plan does meet the requirements by establishing a Special Investigation Unit.

Disaster Recovery Plan

The Company has developed a Disaster Recovery Plan for use with Florida business.
The disaster recovery plan is designed to restore critical systems and is tested regularly.
The current plans have been updated as recently as March 2001 for host environments
and August 2000 for LAN-based environments. The plan is reviewed and updated
annually to accommodate major changes with updated pages or sections distributed to
team members.

Internal Audit Procedures

The Company has developed Internal Audit Procedures for use in reviewing Florida
business. Underwriting, Operational and Claims internal audits are conducted
periodically on Florida exposures by dedicated home office auditing and field office


TRAVELERS INDEMNITY COMPANY                                                                   3
personnel. Follow-up audits are performed as needed and focus solely on performance
issues addressed in the full audit review. Additional audits may be conducted after a
market conduct exam to review deficiencies and develop solutions. The Corporate Audit
and Risk Review Department of the ultimate parent company also conducts audits of
Florida exposures.

Privacy Plan

The Company has developed a Plan to meet the requirements of Emergency Rule 4ER-
01. The Company provides a written Privacy Notice to each new and renewal
policyholder.

Statistical Affiliations

Insurance Services Office (ISO) acts as the Company’s official statistical agent.

Credit Reports

The Company was using Credit Reports as an underwriting tool for Personal Lines.
However, the Company has ceased writing Personal Lines insurance in Florida.

OPERATIONS/MARKETING

Marketing

The Travelers Indemnity Company operates on a nationwide basis through dozens of
offices located throughout Florida and the country. Business is serviced through Florida
branch marketing and claims offices as well as regional service centers in Elmira, NY
and Richmond, VA for commercial lines. Personal Lines was serviced through another
service center located in Glen Falls, NY. The Company no longer writes homeowners
business in Florida. All personal lines business is now written under other companies
within the group.

The Company uses fliers, brochures and on-line advertising through the internet.

Agents/Agencies/MGA/Exchange of Business/Direct Response/Internet/Adjusters
and Claims Handling

The Company markets products statewide through licensed and appointed independent
agents, with some exceptions as noted in the Agents/MGA Review Section of this report.
The Company also has some exchange of business arrangements.

Claims are handled through claims offices located in Tampa and Orlando, Florida.

Lines of Business

During the scope of the examination, the Company wrote the following lines of business:
homeowners, fire and allied lines, farmowners, commercial multi-peril, inland marine,


TRAVELERS INDEMNITY COMPANY                                                                4
workers’ compensation, other liability, commercial automobile, fidelity, surety, burglary
and theft, boiler and machinery, and glass.




TRAVELERS INDEMNITY COMPANY                                                                 5
                                 REVIEW OF POLICIES

HOMEOWNERS

Description of Product/Lines of Business

The Company has independently filed its homeowners program in the State of Florida.
The types of policies in the program include: 633, 634 and 636, which are similar to
ISO’s HO-3, HO-4 and HO-6 policies, respectively. This program was written under a
standard rating tier.

Premium and Policy Counts

Direct Premiums Written and in-force policy counts for the scope of the examination are
as follows:

              Year                DPW              Policy Count
              1999             $1,383,431              2,788
              2000             $ 252,051                 407
              2001*            $ (6,459)                   0

* as of 5/31/01

The Company discontinued writing homeowners in 2000. All personal lines business is
now being written under other companies within the group.

Examination Findings

One hundred (100) policy files were examined.

Seven (7) errors were found.

Errors affecting premium resulted in five (5) overcharges totaling $63.00 and two (2)
undercharges totaling $104.00.

The errors are broken down as follows:

   1. Three (3) errors were due to failure to follow the filed rating plan, rating schedule
      or rating rule. This constitutes a violation of Section 627.062, Florida Statutes.
      These errors were due to an incorrect premium computation. These errors resulted
      in one (1) overcharge totaling $37.00, which the Company has refunded, and two
      (2) undercharges totaling $104.00.
   2. Three (3) errors were due to failure to follow the filed rating plan, rating schedule
      or rating rule. This constitutes a violation of Section 627.062, Florida Statutes.
      These errors were due to the use of incorrect protection classes. These errors
      resulted in three (3) overcharges totaling $21.00, which have been refunded by the
      Company.



TRAVELERS INDEMNITY COMPANY                                                               6
   3. One (1) error was due to failure to follow the filed rating plan, rating schedule or
      rating rule. This constitutes a violation of Section 627.062, Florida Statutes. This
      error was due to the use of an incorrect CAT fund surcharge factor. This error
      resulted in one (1) overcharge totaling $5.00, which has been refunded by the
      Company.




TRAVELERS INDEMNITY COMPANY                                                              7
COMMERCIAL AUTOMOBILE

Description of Product/Lines of Business

The Company has adopted ISO’s commercial automobile program. In addition, the
Company uses an independently filed program called “Auto Ultra Pac”. This program
was designed to afford consistent underwriting and pricing by creating and using non-
discriminatory criteria. Risks are evaluated solely on their characteristics and risk
management practices. The program is designed for the following industry segments:
manufacturing, construction, institutions, services, transportation, energy and
communications. A hazard and control engineering survey is required prior to quoting
any prospective insured. Risks are classified as low, moderate or high hazard and each
has a control risk grade of very effective controls, effective controls or ineffective
controls.

Premium and Policy Counts

Direct Premiums Written and in-force policy counts for the scope of the examination are
as follows:

              Year              DPW                 Policy Count
              1999           $4,100,750                  724
              2000           $3,571,421                  633
              2001*          $1,624,641                  549

* as of 5/31/01

Examination Findings

One hundred (100) policy files were examined.

Sixty-four (64) errors were found.

Errors affecting premium resulted in thirty (30) overcharges totaling $8,585.00 and thirty
(30) undercharges totaling $17,141.00.

The errors are broken down as follows:

   1. Twenty-six (26) errors were due to failure to follow the filed rating plan, rating
      schedule, or rating rule. This constitutes a violation of Section 627.062, Florida
      Statutes. These errors were due to the use of incorrect rates. These errors
      resulted in fifteen (15) overcharges totaling $1,266.00 and eleven (11)
      undercharges totaling $10,380.00. The Company has refunded the overcharges.
   2. Eight (8) errors were due to failure to follow the filed rating plan, rating schedule,
      or rating rule. This constitutes a violation of Section 627.062, Florida Statutes.
      These errors were due to the use of incorrect territories. These errors resulted in



TRAVELERS INDEMNITY COMPANY                                                                8
        six (6) overcharges totaling $1,558.00 and two (2) undercharges totaling $565.00.
        The Company has refunded the overcharges to affected policyholders.
   3.   Three (3) errors were due to failure to follow the filed rating plan, rating schedule,
        or rating rule. This constitutes a violation of Section 627.062, Florida Statutes.
        These errors were due to failure to apply the fleet factor. These errors resulted in
        two (2) overcharges totaling $76.00 and one (1) undercharge totaling $95.00. The
        overcharges were offset by the undercharge on the same policy, therefore, no
        refund was made.
   4.   Thirteen (13) errors were due to failure to apply credits/debits within the filed
        range. This constitutes a violation of Rule 4-170.004, Florida Administrative
        Code. These errors were due to exceeding the maximum percentage filed for
        various risk characteristics of the Company’s schedule rating plan. These errors
        resulted in four (4) overcharges totaling $647.00 and nine (9) undercharges
        totaling $3,528.00. The Company has refunded the overcharges.
   5.   Four (4) errors were due to failure to document/substantiate credits/debits. This
        constitutes a violation of Rule 4-170.004, Florida Administrative Code. These
        errors were due to failure to document the schedule rating credit or debit applied.
        These errors resulted in three (3) overcharges totaling $5,038.00 and one (1)
        undercharge totaling $990.00. The Company has refunded the overcharges to
        affected policyholders.
   6.   Three (3) errors were due to failure to apply credits within the 25% range. This
        constitutes a violation of Rule 4-170.004, Florida Administrative Code. These
        errors were due to exceeding the maximum 25% credit on the Company’s
        schedule rating plan. These errors resulted in three (3) undercharges totaling
        $1,204.00.
   7.   Five (5) errors were due to failure to maintain/obtain signed UM forms. This
        constitutes a violation of Section 627.727, Florida Statutes. These errors were
        due to the Company not obtaining or maintaining a signed UM selection form
        from the insured. These errors resulted in three (3) undercharges totaling
        $379.00.
   8.   Two (2) errors were due to failure to provide timely notice of renewal premium.
        This constitutes a violation of Section 627.4133, Florida Statutes.




TRAVELERS INDEMNITY COMPANY                                                                  9
                  CANCELLATIONS/NONRENEWALS REVIEW

DESCRIPTION OF CANCELLATION/NONRENEWAL PROCEDURES

Based upon a review of the selected sample, cancellation/nonrenewal notices are to
provide the minimum number of days required by law for the type of cancellation or
nonrenewal. Notices are sent to the insured and lienholder when applicable. Return
premiums are calculated as of the effective date of the cancellation. Company
cancellations are made on a pro-rata basis and insured requests for cancellation at 90%
pro-rata.

CANCELLATION REVIEW

Twenty-five (25) cancelled policies were examined.

No errors were found.

NONRENEWAL REVIEW

Twenty-five (25) nonrenewed policies were examined.

Three (3) errors were found.

The errors are broken down as follows:

   1. Three (3) errors were due to failure to maintain proof of mailing. This constitutes
      a violation of Rule 4-167.010, Florida Administrative Code. These errors were
      due to the Company’s inability to maintain proof of mailing for the nonrenewal
      notices.




TRAVELERS INDEMNITY COMPANY                                                               10
                          COMPLAINTS/INVESTIGATION REVIEW

A complete record of all the complaints received by the Company since the date of the
last examination has been maintained as is required by Section 626.9541(1)(j), Florida
Statutes. Procedures for handling these complaints have been established by the
Company.

Consumer complaints received during the scope of examination were reviewed and
findings are as follows:

COMPLAINTS RECEIVED FROM DOI

 Consumer Services Ref.       Alleged Violation      Violation Found          Comments
         No.
    S-9900-0010955          Collection for non-pay        None         Company’s position correct
    S-9899-0035202               Cancellation             None         Company’s position correct
    S-9899-0054480               Claim Delay              None         Company’s position correct
    S-0001-0009042               Claim Delay              None         Company’s position correct
    S-0001-0032989              Claim Denial              None         Company’s position correct


Five (5) complaints received by the Company from DOI were examined.

No errors were found.


COMPLAINTS COMPANY RECEIVED FROM CONSUMERS

    Company ID No.            Alleged Violation      Violation Found         Comments
       MC9360                   Cancellation              None         Company’s position correct
       SG4324                   Cancellation              None         Company’s position correct
      MC12293                  Credit Report              None         Company’s position correct
       SG2099                   Claim Delay               None         Company’s position correct
       MC1093                   Claim Delay               None         Company’s position correct


Five (5) complaints received by the Company from consumers were reviewed.

No errors were found.

The complaints reviewed for this Company indicate no business practices were in
violation of Florida Statutes and Rules.




TRAVELERS INDEMNITY COMPANY                                                                         11
                                  CLAIMS REVIEW

DESCRIPTION OF CLAIMS REVIEWED – NON-PPA/MEDICAL REVIEWS

Homeowners claims reviewed included: theft, liability, wind, water damage and fire.
Commercial automobile claims reviewed included: bodily injury, property damage,
collision, comprehensive, glass, uninsured motorists, medical payments and personal
injury protection (PIP).

Examination Findings

Fifty (50) claims were examined. Thirty (30) were homeowners and twenty (20) were
commercial automobile claims.

Four (4) errors were found.

One (1) error resulted in an underpayment totaling $41.73.

The errors are broken down as follows:

   1. Two (2) errors were due to failure to disclose information. This constitutes a
      violation of Section 627.4137, Florida Statutes. These errors were due to delays
      in responding to requests to disclose policy information.
   2. One (1) error was due to failure to maintain records. This constitutes a violation
      of Section 627.318, Florida Statutes. This error was due to the Company being
      unable to locate a claim file.
   3. One (1) error was due to failure to properly adjust a claim. This constitutes a
      violation of Section 626.877, Florida Statutes. This error was due to the
      Company not paying the amount due after application of the deductible. This
      error resulted in an underpayment totaling $41.73, which has been paid by the
      Company.




TRAVELERS INDEMNITY COMPANY                                                                12
             AGENTS/MGA REVIEW/ADVERTISING/MARKETING

DESCRIPTION OF MGA ARRANGEMENTS

The Company does not have or utilize an MGA.

Examination Findings

Thirty (30) applications/policies written during the scope of examination were examined.

Three (3) errors were found.

Two (2) errors resulted in unpaid license fees totaling $120.00.

The errors are broken down as follows:

   1. Two (2) errors were due to the use of unlicensed/unappointed agents. This
      constitutes a violation of Section 626.112, Florida Statutes. These errors resulted
      in unpaid license fees totaling $120.00, which have not been paid by the
      Company as they were processing the appointment after the examiner’s departure.
   2. One (1) error was due to failure to properly countersign a policy. This constitutes
      a violation of Section 624.425, Florida Statutes. This error was due to a policy
      not being countersigned by a Florida resident agent.




TRAVELERS INDEMNITY COMPANY                                                            13
                                  PENDING ISSUES

The following issues were pending at the conclusion of the examination field work:

MONETARY ISSUES

   1.      Agents/MGA Review/Advertising/Marketing

           a. There were two (2) outstanding appointments totaling $120.00 in unpaid
              license fees that were being processed after the examiner’s departure.

CORRECTIVE ACTIONS

   1.      Commercial Automobile

           a. The Company must establish procedures to ensure that the maximum
              percentage filed for the various risk characteristics of the Company’s
              schedule rating plan are not exceeded. These procedures should be
              established within 90 days after receipt of the examination report, with
              written documentation to the Florida Department of Insurance certifying
              that corrective action has been taken.




TRAVELERS INDEMNITY COMPANY                                                              14
                              EXHIBITS

SUBJECT                                  EXHIBIT NUMBER

CORPORATE OFFICERS                              I




TRAVELERS INDEMNITY COMPANY                          15

								
To top